My Fat Rollover Check Arrived.

My $16,000 401k rollover check arrived today in a nice plain envelope. It’s actually the biggest check I’ve seen. Do you write a check when you buy a house? I guess the money gets zapped straight from your mortgage lender bank to the seller’s bank? Anyways, I thought I’d scan it for fun before I send it on to Vanguard.

Comments

I have bought three houses now (not that I am an expert) and every time I have gotten a cashier’s check made out to me for the down-payment/closing costs. I then endorse the check and give it to the title company when the deal is done.

I have done the same thing as trip.
Yes, you can do a trustee-to-trustee rollover… but only if you buy and sell the houses in a short period of time (like you sell your house one day and buy another one the next day.

My purchases have been with cash from the bank that had been there for a few months (after being moved out of investment accounts into the bank accounts).

JLP – This was a trustee-to-trustee transfer. For some reason Fidelity doesn’t do it online. The wrote the check to Vanguard (click on pic to see big version) and then I have to send it on to Vanguard. They said they only do it directly for IRAs, not 401k rollovers. Shrug. I vented about this in my ‘Final Decision’ post too.

I just read all of the backstory related to your decision to switch from Vanguard to Fidelity. Very interesting, and rational, decision. However, I am curious: If Fidelity offered a fund with a similar allocation to the Vanguard Target 2045 Fund (VTIVX), would you have stayed with Fidelity? Or were some of the other issues you cited also important?

Maybe… at the time of the rollover Fidelity charged an extra layer of fees on top of the fees on the underlying funds. I think they have recently removed the fee due to pressure from Vanguard and other mutual fund companies that do not tack on this extraneous fee.

I understand that if you do a direct 401k rollover to yourself, your employer is required to withhold 20% of the money for submission to the IRS which will then be paid back to you once you rollover the funds to an IRA or another qualified plan.

Here is an example:

With a direct rollover, the check will be made out to the financial institution that holds and maintains your account. We advise NOT to instruct your old employer to make the check out in your name, as the tax consequences and penalties for doing this are severe! Here’s how. If the check is made payable to you, your former employer will be required to withhold 20% of your account value as federal withholding tax.
Source:http://www.research401krollover.com/direct-401k-rollover.html

As an example, if you have $100,000 in your 401(k) that is made payable to you in a check, your employer will withhold $20,000 for remittance to the government. Thus, in order to bring your balance up to $100,000 in your new account, you will have to pay from your own pocket, an additional $20,000 within 60 days of receiving the distribution. The IRS will then return the $20,000 owed to you when you file your tax return upon correct completion of your rollover.

Quick Question: My prior employer has suggested making my 401K check out to Fidelity, where I plan on rolling my money into a Rollover IRA. However, my employer wants to mail the check to me with the check being made payable to FMTC (Fidelity Management Trust Company). By a check being mailed to me, will I be charged the 20% and 10% penalty fees even if the check is not made payable to me?

Also, even though the 401K check is mailed to me but made payable to Fidelity, is this still considered a direct rollover?

My son received an unsolicited check from some institution stating that it was his 401k from a previous employer.

1)Can they do that?
2)Does he have a way to start an IRA or something and get what was withheld back?
3) if he does just cash it (it wasn’t but a few hundred dollars), will there be further tax consequences?

Archives

Categories

Connect with me

MyMoneyBlog.com is for informational purposes only. Do not take it as legal, financial, or tax advice for your personal situation. Always consult with an appropriate expert.

Rates and terms set on third-party websites are subject to change without notice. Per FTC guidelines, MyMoneyBlog.com has financial relationships with the merchants mentioned. MyMoneyBlog.com is compensated if visitors click on any outbound links and generate sales for the said merchant.

I thank you for supporting this site. This is an independently-owned site and all opinions expressed are my own and have not been reviewed, approved or otherwise endorsed by anyone else.